Suppose that a hypothetical economy has the following relationship between its real domestic output and the input quantities necessary for producing that level of output.

(a)   What is the level of productivity in this economy?

(b)   What is the unit cost of production if the price of each input is $2.00?

In December 2010, Alpha Technologies Plc. issued coupon bonds with par value £100. The coupon rate is 8 percent annually and the bonds will be redeemed at par value in December 2015. What is the price of the bond if the competitive market interest rate is 10 percent? How would your answer change if the coupons were paid semi-annually?

the data on ages (in years) and prices (in hundreds of dollars) for 8 cars of a specific model are given:

Age: 8 3 6 9 2 5 6 3
price: 45 210 100 33 267 134 109 235

Fund the linear correlation coefficient r. Use appropriate test to indicate if there is a linear correlation.

1. A five-year $1000 face value bond has a 5% coupon rate and a 10% yield to maturity. It makes annual coupon payments selling for $810.46. Please calculate this bond’s (20 points)

1. Macaulay duration
2. Modified duration
3. Convexity
4. If the interest rate rises by 100 bps, what would be the dollar amount change in price?

Suppose that the market for bike locks is served by a monopolist with marginal cost given by MC = 20. It is also the case that inverse demand for bike locks is given by P = 100 – 0.25Q.

1. (20 points) What are the equilibrium price and quantity?
2. (15 points) What is the monopoly profit?
3. (15 points) What is the deadweight loss associated with monopoly power?

a)Define economic theory and give an example of a ceteris paribus problem
b)Discuss broadly into details why the balance of payments report is useful to the Ministry of Finance.
c)Differentiate between:
i)normative economics and positive economics
ii)price elasticity of demand and income elasticity of demand
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Briefly identify and explain the significance of any 5 of the following items. A
short paragraph (2-4 sentences) should be sufficient in nearly all cases. In the case of a
quotation, please identify the author and explain what theory or principle it illustrates or
exemplifies.

10. Apatheia.
11. Emotivism.
12. Alison Jaggar.
13. “To be truthful and honest in all declarations is a sacred and unconditionally
commanding law of reason that admits of no expediency whatsoever.”
14. “A man should be willing, when others are so too, as far forth as for peace and
defense of himself he shall think it necessary, to lay down this right to all things;
and be contented with so much liberty against other men, as he would allow other
men against himself.”
15. Summum bonum
16. Hedonism
17. “The question is not, ‘Can they reason?’ nor, ‘Can they talk?’ but rather, ‘Can
they suffer?’”
18. Phillipa Foot.
19. Ayn Rand.
20. ”Two things fill the mind with awe, the starry heavens above and the moral law
within.”

Two 1000 dollar face value bonds are both redeemable at par, with the first having a redemption date 3 years prior to the redemption date of the second. Both are bought to yield 11.6 percent convertible semiannually. The first bond sells for 773.3 dollars and pays coupons at 7.9 percent convertible semiannually. The second bond pays coupons at 5.2 percent per half year. What is the price of the second bond?

A borrower is offered a 30 year, fully amortizing ARM with an initial rate of 3.35%. After the first year, the interest rate will adjust each year, using 1 yr LIBOR as the index, plus a margin of 175bp. The price of the property is $8,000,000 and the loan will have an initial LTV ratio of 75% At the first reset date, 1 year LIBOR is at 3%. What is the borrower s payment during the 2nd year of the loan?